Microsoft's Big AI Server Investment Sends Nvidia's Stock Soaring, AMD Also Benefits

Microsoft's Big AI Server Investment Sends Nvidia's Stock Soaring, AMD Also BenefitsOn Wednesday, Microsoft and AMD both made positive comments, indicating that billions of dollars worth of GPU-based AI server projects continue to move forward without any signs of slowing down. Following this news, Nvidia's stock price surged 13%

Microsoft's Big AI Server Investment Sends Nvidia's Stock Soaring, AMD Also Benefits

On Wednesday, Microsoft and AMD both made positive comments, indicating that billions of dollars worth of GPU-based AI server projects continue to move forward without any signs of slowing down. Following this news, Nvidia's stock price surged 13%.

Microsoft CEO Satya Nadella and CFO Amy Hood said on Tuesday's earnings call that the company plans to further increase its investment in Nvidia infrastructure over the next year. Microsoft's capital expenditure for the fourth quarter reached a record $19 billion, with about 60% allocated to hardware purchases. The company also stated that it has seen significant returns on investment from its high-cost GPU servers.

Previously, there was widespread concern that intense competition among cloud service providers could slow down Nvidia's AI sales growth. However, Microsoft's earnings call effectively alleviated these concerns and boosted investor confidence. UBS analyst Karl Keirstead noted in a Wednesday report that Microsoft's capex of $19 billion, exceeding expectations, would undoubtedly encourage most Nvidia and semiconductor investors.

Nvidia, a major beneficiary of the AI boom, has seen its stock price surge over 500% since the launch of ChatGPT in November 2022 and has doubled in 2024. Morgan Stanley analysts rated Nvidia as "overweight" in a Wednesday report, believing that concerns including competitive dynamics, export controls, and supply chain issues would eventually fade with time.

Morgan Stanley analyst Joseph Moore stated that the market was overly pessimistic about some large-scale data centers. Customers have clearly expressed their willingness to invest continuously in developing multi-modal generative AI. He also emphasized that Nvidia's chips are transitioning from the previous generation "Hopper" or H100 series to the next generation "Blackwell," which is likely to stimulate more sales.

Moore said, "We are hearing from customers who want to deploy GPUs as quickly as possible. While the new Blackwell chips are only weeks away, H100 demand remains very strong. So, the current concerns about spending are a little premature."

Meanwhile, AMD, Nvidia's main competitor in the data center GPU market, exceeded both sales and earnings expectations in its Tuesday earnings report. AMD informed investors that GPU demand remains robust. AMD CEO Lisa Su projected that the company's AI chip sales would reach $4.5 billion this year, an 11% increase from previous forecasts.

Goldman Sachs analysts pointed out that the data from Microsoft and AMD contrasts with the concerns of some investors who believe that some cloud service providers and tech giants are overinvesting and expanding too quickly in Nvidia chips and infrastructure. Goldman Sachs analyst Toshiya Hari optimistically stated in a Wednesday report, "We believe that AMD's positive outlook for its data center GPU business, as well as Microsoft's comments about continued increases in capex in fiscal year 2025, are both positive signals for Nvidia."

Nvidia is expected to release its second-quarter earnings in August, with the market eagerly awaiting its performance.

Further Elaboration:

• Microsoft's investment signals a continued boom in the AI server market: Microsoft's massive capital expenditure, especially the portion allocated to hardware purchases, indicates that demand for AI servers remains robust. This contradicts the widespread concern that intensified competition among cloud service providers could slow down Nvidia's AI sales.

• Nvidia's future remains bright: Morgan Stanley analysts believe that Nvidia faces challenges such as competition, export controls, and supply chain issues will eventually be resolved. Meanwhile, the launch of the next-generation "Blackwell" chip will further stimulate market demand.

• AMD also benefits from the AI boom: AMD's earnings report shows robust GPU demand, with projected significant growth in AI chip sales. This suggests that AMD has made significant progress in the data center GPU market and is driving the AI industry alongside Nvidia.

In conclusion, recent news from Microsoft, Nvidia, and AMD indicates that the AI server market continues to maintain strong growth momentum, and the prosperity of the AI industry will continue.